The veto will have direct implications on financing the purchase of two share holdings in the Greater Sunrise field consortium, the President said in a statement.

Francisco Lu Olo Guterres, speaking at the Presidential Palace in Dili, gave five reasons

to justify the decision to veto the bill, questioning aspects such as the removal of the need for prior approval by the Chamber of Auditors, the retroactivity of the proposed changes and the lack of information and knowledge of parliament members when they voted for the changes in question.

“We must not forget that the Petroleum Fund is Timor-Leste's only sovereign fund, which must be preserved as a financial reserve, as determined by the Constitution,” he said.

Lu Olo said the Petroleum Fund Law already allowed direct investment in petroleum operations, “as long as they correspond to financial assets or high-return liquidity assets.”

“I want to remind the beloved people of Timor-Leste that the National Parliament has been authorising withdrawals from the Petroleum Fund as financing transfers to the General State Budget since 2005, in excess of 10 billion US dollars,” he said.

“With this veto, we can continue safeguarding the financial sustainability of the Timorese Nation, in the short and long term, as long as we implement investment rules and policies that comply with the Estimated Sustainable Income levels, maximising the financial return to the Petroleum Fund.”

The President said he was “convinced that the right path” was one where withdrawals from the Petroleum Fund were made through the financing of expenditures or investment via the General State Budget, because “this is the only way to continue to ensure transparency, openness, and compliance with constitutional provisions.”

“Under these conditions, the Petroleum Fund will be able to fulfil its mission — to invest in high-return financial assets in order to accumulate capital with enough liquidity to finance the General State Budget each year, for many years to come.”

Under the Timor-Leste constitution in the event of a Presidential veto the law changes can be reconsidered by the National Parliament, which has up 90 days to confirm it by an absolute majority, then return it back to the President who is mandated to approve it within eight days.

The President’s veto affects the agreed purchase of the 30 percent interest owned by ConocoPhillips and 26.56 percent by Royal Dutch Shell in the Greater Sunrise field, for which Timor-Leste government has committed to pay US$350 million and US$300 million, respectively.

Both deals, the first in October with ConocoPhillips and the second in late November with Shell, were conditional on receiving funding approval from the Timor-Leste Council of Ministers and National Parliament, as well as regulators and other approvals.

Arao Noe, the President of the National Parliament, expressed concern. 

Noe said the veto would make it difficult to meet the signed purchase amounts and warned that the government could face a $7 million fine to ConocoPhillips if it could not access the funds by March 2019, when he spoke to media on Wednesday.

The Fretilin opposition party, whose members voted against the proposed amendments to the law on November 14, has maintained that the buy-out of ConocoPhillips’ 30 percent share was “illegal” as it violated the 20 percent limited provided in the 2005 Law.

The Greater Sunrise oil field consortium in the Timor Sea is led by Australia’s Woodside, which owns 33.44% of the capital and includes ConocoPhillips (30%), Shell (26.56%) and Osaka Gas (10%).